Friday, January 25, 2008

China insurers risk massive redemptions and liquidity difficulties

-- China's insurers, among the world'smost valuable after reaping record gains from a stock rally, risk ``massive'' redemptions and liquidity difficulties should markets slump, the industry regulator said.
--``Once the capital market heads for a downturn, we will suffer very badly and face huge risk,'' Wu Dingfu, chairman ofthe China Insurance Regulatory Commission said in Beijing today.``There can be massive redemptions and insurers may faceliquidity difficulties.''
--China Life Insurance Co. and rivals earned a record 279.2billion yuan ($38.7 billion) from investment returns last year,more than the previous five years combined, the commission saidtoday. The gains underscore the industry's dependence on a stockmarket that has lost 14 percent from its Oct. 16 peak aftersurging more than sixfold in the previous two years.
-- ``Insurers' share prices are extremely sensitive in theshort term to their equity investment results,'' ``Chinese insurance companies will face a double whammy as theyincreasingly eye stakes in foreign insurers, which have evenhigher exposure to equities.''